Wall Street Strategists sounds a note for the investors who are inclined to relax in the summer after a period of turmoil: do not rest on your laurels.
Even though the sunny season in Western Europe and the US, as a rule, is described by lower trading volumes, the numerous political turbulence, from Brexit to trade contradictions, haven’t patched up yet.
Andrew Shits, chief strategist at Morgan Stanley on Intermarket products, said in an interview with Bloomberg television that “The summer is in motion, which, most likely, will remain turmoil.”
“We are in store for news about steel tariffs and trade negotiations with China, we also have a North American free trade agreement, political turbulence in Italy and the likelihood of forming a new government in Spain.” The market needs to absorb a lot of new,” he added.
Shets proposes “reducing positions” and declining the share of risky investments to “more neutral.”
Although the exhilaration over the new populist Italian government is fading, some market participants still come up with the possibility that it governs the country. So, George Soros gave the caveat at the weekend that the differences in the agenda could spawn a new turmoil and ultimately doom the cooperation to decomposition.
In the meantime, a combination of factors can add the finish touches to the further development of the dollar, triggering the tightening of financial conditions for foreign borrowers and raising the likelihood of turbulence in the emerging markets that have subsided.
“The prospect for the dollar looks upbeat in the summer,” wrote Mansur Mohiuddin, head of the currency strategy at Natwest Markets Plc. He refers to the Federal Reserve rate increase, trade protectionism and the challenges encountered by the European Central Bank in an effort to normalize monetary regulation against the background of political turmoil in the euro area.
A summer laded with Brexit negotiations menace to overtake Bank of England regulation as the most significant driver of the pound, cited by strategist at ING Groep NV. A conference with EU officials gets going at the end of the month, ahead of Britain’s scheduled departure in March 2019 with the U.K still struggling to forge a proposal on post-Brexit customs arrangement.
According to Wells Fargo & Co. Strategists led by George Bory, it is high time for credit investor to in store for a relatively volatile summer which is in motion.